Panic was the last thing on my mind when a letter from the Internal Revenue Service (IRS) appeared in my mailbox.
When I started my business in 1990, I took a course on organizing my company records so all would be easy to understand if I were audited. I hoped that such teaching would be helpful to open and close whatever case the IRS was investigating, and soon I learned it wasn’t my business they were reviewing – it was my personal income.
Little did I know that the boxed software I purchased to compile my taxes was now woefully inefficient, because when your spouse passes away and you need to withdraw monies from an inherited account, you need a certified public accountant (CPA) to handle taxes. The software that comes in a box doesn’t know how to document such monies.
Thankfully, a small business attorney led me to a CPA who I’ll never fire. This man couldn’t get rid of me if he tried. He held my hand through one year of the IRS battle and was my buffer through written and phone call requests which, in itself, saved me from a mountain of anguish.
At first I thought I could handle the situation on my own. I soon realized that my thoughts were wrong, and the CPA came to my rescue.
The IRS bill was settled, the CPA was paid, and now I never complete my own taxes. It’s a burden off my shoulders in many ways.
Tax software that comes in a box is fine if you have little to declare and no catastrophic circumstances to settle. Millions of people use the product, but some of those millions may find themselves in a similar situation as me and panic if the IRS letter arrives.
May you never face the same dilemma, but just in case, these tips may be handy if you are faced with what I’ve experienced.
1. IRS representatives are not your friends unless you happen to know a person who happens to work for that agency. Sitting down with them face to face in your home does not make the circumstance better, so do not invite them thinking you can handle the matter on your own.
2. Keep as many financial records as possible for seven years. It’s hard to remember where monies come from unless it is from a traceable source, so keep every monthly bank statement with your records. Banks merge and go out of business. The IRS will claim tax liability if you cannot prove your money sources.
3. Get representation. Need I say more? You do not want to speak directly with the IRS. They will use hours of your time asking questions that ultimately inflate your tax bill. They will disrupt your life, and they don’t care because it’s not their job to care. You either know a CPA or, like me, know someone who knows one. Call the CPA. Interview the person. Ask questions you’ve prepared ahead of time, questions you can find online, and other questions that are specific to your needs.
4. Pray to whomever you pray to for guidance and a good outcome. I was questioned about $2,000 that was deposited in an account. I couldn’t figure out where the money came from, and I don’t keep such an amount under my mattress. I was frustrated and prayed to help me uncover the source. Suddenly, I remembered a savings account I have through a credit union. That’s where $1,900 of the money came from. Prayer works.
5. Don’t put any of your precious energy into cursing the IRS. Get help, get your papers in order, and take care of business. Learn from the experience so it doesn’t happen again. Sweep the angst from your mind. That agency does not matter. Enjoy your life.
The dilemma toughened me in a good way. Now, absolutely nothing that arrives by mail makes my heart jump except big checks payable to me. That’s a true blessing that I keep top of mind.